• 10 hours $5 Million Gold Toilet Vanishes
  • 10 hours Gold On The Rise After Fed Rate Cut
  • 13 hours Oil Trader Loses $320 Million On Derivative Bets
  • 1 day S&P 500 Officially In An Earnings Recession
  • 2 days Miners Are Weathering The Trade War Storm
  • 2 days UK Credit Card Interest Rates Are Skyrocketing
  • 2 days From Frenzy To Flop, The Death Of This Year’s Most Hyped IPO
  • 3 days Are Smart TVs Spying On Us?
  • 3 days Is Fossil Fuel Divestment A Waste Of Time?
  • 3 days A Russian Billionaire’s Space Quest To Save Humanity
  • 4 days Markets Take Breather As Consolidation Continues
  • 4 days Economic Woes Weigh On Copper Prices
  • 4 days World's Largest IPO At Risk Following Drone Strikes
  • 4 days Gold Is Beating Buffett’s Berkshire Hathaway
  • 5 days What’s Behind The Silver Sell-Off?
  • 5 days The Retail Apocalypse Is Accelerating
  • 5 days The Top Tech Stocks Of The Year
  • 5 days America’s Workforce Elderly Workforce To Double By 2028
  • 6 days Toyota Tests Solar-Powered Prius
  • 6 days Why The Gold Rally Flatlined
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Yield Curve Steepens Dramatically: What's Going On?

US treasuries are seeing action we have not seen for a while: Strong sharp steepening of the yield curve.

The yield curve is said to steepen when the spreads between short-term and long-term rates increases. The yield curve flattens when spreads shrink.

  • A bearish steepener occurs when rates are rising and long-term yields are rising more than short-term rates. Spreads widen.
  • A bullish steepener occurs when rates are falling and short-term rates are falling faster than long-term rates. Spreads widen.
  • A bullish flattener occurs when rates are falling and long-term rates are falling faster than short-term rates. Spreads narrow.
  • A bearish flattener occurs when rates are rising and short-term rates are rising faster than long-term rates. Spreads narrow.

The terms bearish and bullish refer to capital gains (bullish) or losses (bearish) if one is invested in government bonds.

Bearish Steepener Meaning

A bearish steepener is generally a sign that market participants believe the economy is getting stronger and the Fed (Central Bank), will be hiking rates faster than previously anticipated or more than anticipated.

What Happened Today?

  1. The housing market was stronger than expected: Housing Starts Jump More Than Expected: Economy Overheating?
  2. The current account deficit shrank more than expected: Current Account Deficit Shrinks Due to Hurricanes

June Rate Hike Odds

 https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/VCILyFJSl0m3O0CTYqo7GQ

Synopsis

  • The Fed Funds rate is currently 1.25% to 1.50%
  • The odds of two quarter point hikes through the June meeting increased from 32.5% yesterday to 38.1% today. This is consistent with the bearish steepening of the yield curve.

I did not believe the Fed would hike as much as expected in 2018, and today does not change my mind.

By Mike "Mish" Shedlock

Back to homepage

Leave a comment

Leave a comment